Anthem Blue Cross and Blue Shield in Connecticut, the state's largest health insurer, told regulators Friday that expensive pharmacy services, new federal fees, and the rising cost of medical services are behind its request to raise rates on individual plans in 2015.

The company is seeking a rate increase that averages 12.5 percent for a suite of individual health plans, affecting 66,200 policyholders nationwide.

Anthem officials testified at a hearing called by the Connecticut Insurance Department at the request of state Healthcare Advocate Victoria Veltri. Anthem executives were questioned by department actuary Paul Lombardo and an attorney for the healthcare advocate.

Michael Bears, an actuary and regional vice president at Anthem, offered the following reasons for the proposed increase:

An increase in the cost of medical services and customers' demand for those services, referred to in the industry as "trend."

Some changes to pharmaceutical costs, including new treatments for Hepatitis C, such as the expensive drug Sovaldi.

An increase in federal fees levied on insurers to help fund tax credits, also called subsidies, which was a part of the Affordable Care Act to make coverage more affordable for anyone who makes up to 400 percent of the federal poverty level: $46,680 for an individual, $95,400 for a family of four.

A presumed decrease in the federal reinsurance program which exists to encourage insurers' participation in public health exchanges. In 2014, the program pays for 80 percent of a patient's medical expenses once the cost totals $45,000, though the reimbursement does not apply to expenses beyond a total of $250,000. (Federal officials had planned to change the program in 2015 to a 50 percent reimbursement starting at $70,000 in medical expenses, though the federal government hasn't made a final ruling on the terms, according to Insurance Department actuary Paul Lombardo, the hearing officer Friday.)

The Affordable Care Act allows a risk adjustment that requires insurers who had healthier patients to pay insurers with sicker patients to offset the more expensive claims. Anthem expects to receive money from other insurers, and this curbs the other factors that are making coverage more expensive.

Bears said pharmacy services are getting more expensive because there is less opportunity to buy generic substitutes for brand-name drugs; a new and expensive drug, Sovaldi, is being used to treat Hepatitis C; and wholesale drug prices are going up.

To emphasize his point, Sovaldi cost Anthem about $30,000 in January for one customer. In May, the insurer spent $430,000 on the drug.

"That's a 16-fold increase since the beginning of the year," Bears said, adding that Anthem expects to spend $4 million to $5 million on Sovaldi alone next year.

The Insurance Department will decide what to do with Anthem's rate proposal within 30 days. The department could approve, reject or modify the rates.

Anthem isn't the only insurer asking for a rate increase in 2015. ConnectiCare Benefits Inc. of Farmington is asking for a rate increase of 11.8 percent on individual health plans sold on the exchange. The increase would affect 27,500 policyholders.

Another insurer, HealthyCT Inc., is asking for a rate decrease averaging 8.9 percent on individual health plans sold on and off the exchange for coverage beginning Jan. 1. The lower rate would affect 7,248 policyholders.

Before the Anthem hearing started, a half-dozen members of the public spoke. Among them was Arleen Block of Weston, who said her 26-year-old son has struggled with the logistics of getting his needed prescriptions covered by Anthem.

Block said her son makes about $1,100 per month conducting after-school programs for children. His low income qualifies him for Medicaid, but the specialists he needs won't take the government-funded coverage. So, he bought an Anthem plan at a cost of about $340 per month, Block said. A 12.5 percent increase would make the expensive coverage even more unbearable, she said.

Arvind Shaw, CEO of Generations Family Health Center in Willimantic, told insurance regulators he is against the rate increase because of Anthem's "ineptness" and difficulty in getting medical claims paid.

"So, out of 290 claims that [were] processed by us, we have only received payment on one of them correctly," Shaw said, adding later, "The health center is frustrated with the poor communications and lack of follow up with Anthem."